The Dow hit 20,000 yesterday. We've been waiting weeks for this. It got oh so close three weeks ago on January 6th and again on January 11th. But then it retreated more than 220 points in the next eight days closing at 19,732 on January 19th, leaving one to wonder if maybe it would be awhile yet before the market hit this milestone we'd been so close to. And just as we may have been thinking that, the market marched up 336 points in 4 short business days to breach that highly anticipated number – 20,000.
The Dow's moves in January are a microcosm of how it's moved over the last 40 years. In 1987 the Dow peaked at 2722 (an all-time high at that time) on August 25th. On October 19th, known as "Black Monday", the Dow dropped over 500 points from 2246 to 1738. It took two more years, until August of 1989 for the Dow to get back to 2722. The Dow roared through the 1990s opening at 2810 and ended 1999 at 11,497. As exciting as the 90s was for stocks, the 2000s was anything but, with the Dow opening at 11,497 on January 3, 2000 and closing at 10,428 at the end of 2009. In October 2008 the Dow dropped from 10,831 on the 1st to 8,451 by the 10th and continued downward to 6,547 on March 9, 2009. That was the bottom and since then the market has been ascending to its current level of 20,068.
So here we are. Now what? Some will say that the market is overvalued and we're due or overdue for a huge correction. Others will say that we can go marching upward from here. The reality is that no one knows for sure. I'll be the first to tell you that I don't have any idea. But the good news is that we don't need to know.
Most people can probably admit to themselves that they don't know where the market will go from here. Where a lot of people have a problem is accepting that fact. They watch the investment shows on TV and hear a guy on the radio or see an article online and try to get some "insight" into where the market's headed next.
I'm okay not knowing where the market may go in the short term. I'm not investing for the short term. I'm confident of where the market is going over the long term – and that's what I'm investing for. If you can get okay with the fact that you don't need to try to figure out the market's short term moves, you will be one step closer to investment success – and you will sleep better at night.
Since 1987 the Dow has been all over the place – way up in the 90s, flat for a decade from 2000–2009, way down in 2008-2009, and back up again from 2009 until now. But long-term, big picture, it's increased ten-fold. You didn't have to know any of those market moves were going to happen. All you had to do was continue investing. The market was going to go up ten-fold with or without you. So don't sweat the short-term, don't worry about where the market's going from here. It's time in the market that matters, not timing the market.